The US as a nation is beginning to relax the most severe social distancing measures put in place to make sure a tidal wave of COVID-19-infected people wouldn’t overwhelm the medical care system.

I have no idea what’s going to happen as we recover, but I’m willing to hang my hat on two ideas:

–the key issue is hospital capacity, and

–that reopening will continue, with the throttle being opened or choked back, not by the number of new virus cases, which I think will likely rise, but by the availability of hospital beds.

The stock market senses this policy shift and is starting to react.  “Starting” may be a bad word.  The Russell 2000–mid-sized firms with revenues and costs in the US–was down by 40% ytd a month ago.  It has risen by about a third since then, meaning it’s still down by a bit more than 20% ytd.

Banks, hotels, cruise lines, restaurant chains all show similar patterns.

Just as important, secular growth, capital flight tech names, which have been very strong so far this year (MSFT is up by 10%, for example, the ARK Genomics ETF is +20%  (I own both (btw, I really like the ARK people and own several of their ETFs)), are beginning to lose steam.  (This is really a horrible sentence.)

What to do?

This is, of course, mostly an issue of investment philosophy and risk tolerance.  For what it’s worth, I’m very aggressive, have a portfolio I actively manage, where I’m very heavily weighted toward tech.  I’ve begun to shift a tiny bit toward the names that have been crushed by pandemic fears.

So far I’ve bought a Russell 2000 ETF and established a small position in Marriott (MAR).

I’ve thought about the cruise lines, which are the swing for the fences “value” bet, and decided I don’t know enough and don’t want to take the risk.   There should be (I haven’t looked) a ton of very recent information on the SEC EDGAR site about Carnival (CCL) given the company’s recent financing, which should give prospective buyers some comfort.  But at the end of the day I can imagine taking a small-boat river cruise but I’m not a CCL customer.

I also thought about Boeing (BA), but I’m not sure I have any clue about the depth of incompetence and corruption involved in the company’s newest commercial aircraft development.  My experience suggests we’ve only seen the tip of the iceberg.  The counter-argument is that BA has a substantial defense business and that it’s one of only two major aircraft manufacturers in the world.  So it can’t be allowed to fail.  I’m passing, though.

(An aside:  the key to investment success is not to have an opinion about everything;  it’s to know more than most about a few things that you monitor carefully.)

Why MAR?  A simple answer is fewer warts than CCL or BA.  I know something about the company and use its products.  Also, by and large, publicly traded hotel companies don’t own the physical hotels.  They provide branding, property management and reservation system services, in return for taking the lion’s share of profits.  Yes, less upside than with property owner CCL, but also less risk that my ignorance will come into play in a bad way.

Assuming I’m correct about this market shift, is this just a counter-trend rally?  Yes, but…  There may be a quibble about the word “just”;  but this domestic-centric rally could go on for months.

At some point it will be important to have ideas about how the post-pandemic US will be different.  I’m not sure that’s right now, though.  I think it’s better to be trying to figure out which firms will lose their appeal in a post-pandemic world–and use them as a source of funds to play the current rally.